Finally debt free (almost) - now to save!

lilian1977

Hi

I have been putting all my spare money away in a savings account since December, and now find myself in a position to pay off my final debt (an RBS loan) on Thursday :T I have decided to do this in order to avoid the interest payments (around £30 a month on a £1600 loan at the moment), as my savings account is on yearly interest and I have just had the payout (£6 :rolleyes:).

So, with this in mind, I am now looking at savings. I want to get the cushion of 3-4 months wages behind me, along with a holiday fund (2 holidays planned this year), a study fund (I study with the OU alongside my full time job) and possibly a wedding fund (engaged but no plans as yet). We are still saving for a mortgage deposit, this hasn't been touched during the loan pay off.

Basically, my post is asking this - what do you guys save for, how much and with whom? Is it a good idea to have the wage cushion, should I try and save a larger balance than 3-4 months worth?

Thanks for any input

Lokolo

It really does depend.

Most people try and save 6 months cushion, but 3-4 months should be ok.

Now depending where you want to save. You can usually keep it all in one account, which you can then switch when the rates get bad. Or you can open multiple pots, but usually instant access with multiple pots ends up being bad interest wise, but its easier to keep track. Egg for example you can open many savings accounts and name them differently, but there interest rate of 0.5% or whatever isn't very attractive.

If you go the former route, then you can use Excel or whatever you determine where each pound goes. Example, if you have £2000 in savings you can have a spreadsheet which says Wedding - £500, Car - £1000, House Deposit - £500, Total - £2000.

A good idea is to work out how much you want to save in each area.

lilian1977

Thanks for that. I have been using the latter route so far but like you say, the interest isn't brilliant. I also worry about interest penalty charges if I withdraw the holiday fund leaving the wage cushion in there - I guess I need to read up on all the accounts.

posted_2

It doesn't have to have a defined purpose or size, find the highest interest rate availaible, which if your are a taxpayer is probably an isa, and save what you don't need to spend (after paying debt off). If you are planning all that future expenditure, any savings will lower your mortgage/future interest.